Time to rein in ridiculously high credit card fees

In mid-December, Senator Pierrette Ringuette of New Brunswick tabled Senate Public Bill S-215, An Act to Amend the Credit Card Payments Act (credit card acceptance fees), to set limits on the fees that the Visa and MasterCard payment networks charge to merchants for accepting their credit cards. These are fees that can often exceed more than three per cent of the final transaction value, which includes taxes.

Canada has some of the highest acceptance fee rates in the world. Using an average rate of 2.5 per cent, credit card acceptance fees cost Canadians more than $8 billion in 2011 based on the $322 billion worth of goods and services paid for with credit cards.

From an industry study conducted by the Canadian Convenience Stores Association in 2011, it was estimated that credit card acceptance fees represented an average cost of $36,000 for every convenience store in Canada. That’s a cost of more than $825 million annually for the industry nationally. It’s also a cost that is equivalent to more than 80 per cent of the annual profits earned by these retailers.

And the situation will only become worse with the proliferation of “contactless” payment options such as Visa’s PayWave and MasterCard’s PayPass systems, which are aimed at increasing the share of $50-or-less transactions that are paid for with credit cards.

But wait, there’s more! Visa has announced plans to increase credit card acceptance fees by 30 per cent in April, while MasterCard has announced a 20 per cent increase this summer!

Consumers who frequently pay with a debit card or cash may think that this is not their issue. But don’t fool yourselves. These fee costs are passed on to all consumers, regardless of how they pay for their purchases, through higher overall prices for goods and services.

The Canadian convenience store industry has long argued that credit card acceptance fees in Canada are onerous. Because of their monopolistic market power, Visa and MasterCard are able to charge enormous fees at a time when many retailers and consumers alike are struggling to make ends meet. With her bill, Senator Ringuette is bringing the issue to the forefront and making it a political priority.

In her bill, Senator Ringuette is proposing acceptance fee rates of 0.5 per cent for standard transactions, 0.3 per cent for government transactions, and zero per cent for charitable transactions. With this action, the elimination of excessive credit card acceptance fees represents billions of dollars in lower retail costs, which should be passed on to consumers to increase their purchasing power and stimulate the economy.

It is expected that Senator Ringuette’s bill will be discussed in the Senate towards the end of January. Atlantic Canada’s convenience store owners and operators wholeheartedly support the senator’s initiative and we think that the Canadian general public should as well. It’s time to rein in ridiculous credit card fees.